QUESTIONS AND ANSWERS ON UNLAWFUL TRADE PRACTICES
UNDER THE FEDERAL ALCOHOL ADMINISTRATION ACT.
Proprietors of distilled spirits plants, bonded wine
cellars, taxpaid wine bottling houses, brewers, wholesale
liquor dealers, importers, retail liquor dealers, and
Purpose. The purpose of this circular is to clarify
the regulations relating to exclusive outlets, tied-
houses, commercial bribery, and consignment sales. Those
regulations, 27 CFR Parts 6, 8, 10 and 11 were issued as
T.D. ATF-74 on September 23, 1980, and became effective
on November 24, 1980.
Industry members have raised a number of questions
regarding the interpretation of these regulations. In
order to avoid responding to all inquiries individually,
ATF is issuing this circular to inform all industry
members and retailers about our positions.
Questions and answers. Questions arising from T.D.
ATF-74 include the following:
Does section 6.53 imply that all alcoholic
beverage advertising in a ballpark, race-
track, or stadium by a wholesaler or
producer is prohibited?
No, this section does not prohibit an
industry member from purchasing advertis-
ing at a racetrack, ballpark or stadium.
However, where the racetrack, ballpark or
stadium is a retail liquor dealer or
influences the purchases of a retailer
operating on the premises, a violation of
the FAA Act could occur if the purchases
by the retailer are conditioned specifi-
cally on the advertising payments to the
third party or the retailer, and the
payments result in the exclusion of the
products of another industry member,
subject to the jurisdictional limits of
Section 6.54 lists the purchase of
advertising by an industry member in a
retailer publication for distribution to
the public as an inducement. Does this
section prohibit an industry member from
purchasing advertising in an airline's
in-flight magazine, or in a program
distributed by a concert hall or theatre?
This section would not prevent an industry
member from purchasing advertising in
magazines, programs or brochures distri-
buted by airlines, theatres, or other
retailers, if the purchase does not result
in the exclusion of products sold by other
Section 6.44, Free warehousing, prohibits
an industry member from delaying the
delivery of product beyond the time the
payment from the retailer is received or,
if the retailer is purchasing on credit,
from delaying delivery beyond the close
of the period of time for which credit is
lawfully extended. If a retailer places
a special order for a product, prior to
making payment for the product, may the
retailer have it reserved and stored at
the wholesaler's premises for seventy or
eighty or ninety days without violating
Since the period of storage is before the
retailer purchases the product, a viola-
tion of section 6.44 is not present. If,
however, the retailer and wholesaler enter
into a contract for the retailer to buy a
certain quantity of product over a period
of time, the resultant arrangement could
fall under section 8.22, Contract pur-
chases, or section 6.71, Quota sales, and
might result in a violation of the Act.
Under section 6.81 records need to be
kept by industry members for furnishing
such items as displays and selling such
things as tap standards and hoses to
retailers. If records are not kept, does
that affect the special exemption which
permits these items to be furnished?
Yes. In order for the furnishing of such
items as displays, tap standards and hoses
to be exempt from any possibility of
causing a violation, all of the conditions
of Subpart D, Part 6, including record
keeping, must be met. If records are not
kept, these items would lose their status
as "exceptions" and would be grouped with
the other things of value that could lead
to a violation.
Section 6.83 allows a wholesaler or
producer to furnish a retailer a product
display valued to $109 per brand in use
at any one time. Industry members are
also prohibited from "pooling" their
dollar limits in order to furnish a
product display worth more than $109 per
brand. If a wholesaler carries two
brands, may that wholesaler furnish a
display valued at up to $218 if both
brands of products are displayed?
Yes, the wholesaler may "pool" brands in
order to provide a product display valued
up to $218, as long as both brands are
displayed, and the display carries con-
spicuous and substantial advertising
matter for both brands.
Note: As announced in Industry Circular
82-1, dated March 22, 1982, the dollar
limitation for section 6.83(c)(1),
section 6.85(b)(1) and section 6.100(e)
were increased to $109 per brand, $54 per
brand, and $109 per year respectively.
These increases became effective
January 1, 1982.
Section 6.85 allows a wholesaler to fur-
nish a retailer coasters, napkins, and
other retailer advertising specialties
valued at a maximum of $54 per brand per
year. May a wholesaler "pool" brands
when furnishing retailer advertising
specialties? For example, could a whole-
saler furnish $108 worth of napkins to a
retailer if the napkins bore advertising
matter for two brands carried by that
Answer. Yes, as long as the wholesaler does not
furnish retailer advertising specialties
to the retailer which would exceed $54
for each brand advertised.
Under what section do Captain's Books
Captain's Books are included in section
6.86, Wine lists, and may be furnished to
retailers without limitation. Captain's
books or wine lists are not limited to
wines and may list any variety of bever-
ages, non-alcoholic as well as alcoholic.
Food menus or combination food and
beverage menus are not among the excep-
tions to the regulations of items that
may be furnished to retailers.
Sections 6.83, Product displays, 6.85,
Retailer advertising specialties, and
6.91, Samples, allow industry members to
furnish certain things of value to
retailers subject to dollar or quantity
restrictions on a per "brand" basis.
What is the definition of "brand"?
ATF Ruling 81-1, 1981-2 ATF Quarterly
Bulletin, pg. 27, held that the term
"brand" refers to differences in brand
name of a product, in the nature of a
product, or in the color or design of a
label. Examples of different brands are
products having a different: brand name;
class, type, or kind designation; appel-
lation of origin (wine); viticultural
area (wine); vintage date (wine); age
(distilled spirits); proof (distilled
spirits); or label design or color.
Differences in packaging such as a
different style, type, or size of
container are not considered different
Under section 6.96(a), may an industry
member reimburse a retailer for consumer
coupons which do not indicate a maximum
"face value" (such as "50 cents off" the
purchase price of a case of Tru Blu Beer),
such as "this coupon may be redeemed for
a free six-pack of beer"?
No, coupons must bear a maximum redemption
value to the retailer. Since section
6.96(a)(2) allows an industry member to
reimburse a retailer for the "face value"
of all coupons redeemed (plus a usual
handling fee), all coupons must bear a
maximum "face value." This value may be
expressed as "cents off" the ordinary
purchase price, or as a maximum dollar
value which the retailer may be reimbursed
by the industry member. Thus, if a coupon
were for "a free six-pack of beer" but
stated that the retailer could be
reimbursed only for the ordinary retail
price of the product not to exceed a
stated dollar figure, it would then bear
a maximum "face value."
Section 6.99 permits industry members to
service their own products by stocking
shelves, rotating bottles, and affixing
prices to bottles at a retailer's prem-
ises. May a producer or importer service
products at a retailer's premises which
they sold to a wholesaler, and which were
then sold by the wholesaler to the
Yes, as long as the retailer grants
permission to the representative of the
producer or importer to service the
product, and provided that products of
other industry members are not altered or
Section 6.95 permits industry members to
sponsor consumer samplings or tastings at
a retailer's premises.
(a) Could a wholesaler give a "grand
opening" party or an "open house" at
a retailer's premises under this
location of a tasting or sampling to
be held at a retailer's premises?
(a) This section is intended to cover
tastings or samplings sponsored by an
industry member to acquaint retailers
and consumers with a product. It is
not intended to familiarize the con-
sumer with a retail establishment,
nor is it intended as a means by which
an industry member furnishes quanti-
ties of food, entertainment, or other
amenities to retailers as a means of
building "good will." While an
industry member may sponsor a product
tasting as part of an "open house" or
"grand opening," the sponsoring of
the "open house" or "grand opening"
itself by an industry member would
not fall under the exception granted
by section 6.95.
(b) An industry member may advertise a
consumer tasting if the advertise-
ment meets the requirements of
section 6.98, Advertising service.
A producer or importer furnishes clocks,
trays, or other retailer advertising spe-
cialties free of charge to a wholesaler.
Under section 6.85, the wholesaler then
furnishes these retailer advertising
specialties to a retailer.
(a) Who must keep the records required by
(b) How are the value of these
The wholesaler is required to keep the
record since the wholesaler is the person
furnishing the retailer advertising
specialties to retailers. Their value
is the cost, such as the manufacturer's
invoice price, to the producer, importer
or wholesaler who initially purchases
them, regardless of whether they are
subsequently given to a wholesaler free
of charge. In order to keep the required
records, the wholesaler must obtain the
cost of the specialties from the producer
or importer. If the producer and
wholesaler share in the cost of such
specialties, the wholesaler's records
under section 6.81(b) must reflect the
full cost of the item.
Section 6.100 outlines ways in which
an industry member may participate in
activities sponsored by retailer asso-
ciations. If an industry member's
actions do not result in exclusion in
whole or in part of products sold by
other persons in interstate or foreign
commerce, may an industry member partici-
pate in retailer association activities
in ways other than those outlined in
Yes, an industry member may participate
in ways not outlined by section 6.100
when they do not result in exclusion.
Does the term "hospitality" in section
6.100(c) include food served or enter-
tainment provided as hospitality at a
retailer association activity?
"Hospitality" may be in the form of snack
food, a buffet, or entertainment such as
a band, furnished to retailers in conjunc-
tion with retailer association activities.
Under section 6.100(c), if the hospi-
tality provided by an industry member is
purchased directly from a hotel or restau-
rant, rather than through the retailer
(a) May an industry member provide
hospitality at the same time and at
the same location as an association
(b) May the hospitality being provided
by an industry member be listed on
the schedule of events and be pub-
licized with association activities?
Yes, hospitality may be furnished by an
industry member at the same time and
location as a retailer association
activity, as long as it is independent
from a particular association sponsored
event. Also, it may be listed on the
schedule of events and publicized with
Under section 6.100(e), may the total
payments from an industry member to a
single retailer association exceed $109
per year if the payment is intended as a
bona fide advertising purchase and does
not result in the exclusion in whole or
in part of products sold or offered for
sale by other persons in interstate or
Yes, payments for advertising in
brochures or programs in excess of $109
per year will not result in violations of
the FAA Act if exclusion as described
above does not result.
Does section 8.22, which prohibits
contracts to purchase, automatically
prohibit all cumulative discounts?
No. Cumulative discounts would be
considered a legitimate form of pricing
arrangement in all circumstances where:
1) They are made pursuant to a written
agreement made at the time of sale.
2) They extend for a specific period of
time, not to exceed 60 days.
3) They are documented on a related
sales invoice or credit memorandum.
As to whether any cumulative discount
agreement beyond these limitations would
tie a retailer to a supplier, and thus
create an exclusive outlet, would have to
be determined on a case by case basis.
May an industry member furnish ordinary
business meals or entertainment to an
officer, employee or representative of a
trade buyer without being in violation of
the regulations in Part 10, Commercial
The furnishing of business meals or
entertainment to a trade buyer is an
inducement under the Act and the regu-
lations in Part 10. An inducement only
becomes a violation of section 5(c) of
the FAA Act when it results in the full
or partial exclusion of products sold by
other industry members in the course of
interstate or foreign commerce. For malt
beverages, enabling State legislation
must also be present for a violation of
the Act to occur. Thus, the furnishing
of business meals or entertainment to a
trade buyer is not by itself a violation
of the Act.
Under section 11.32, a trade buyer who
has a defective product on hand may
exchange it for an equal quantity of
identical product. May the industry
member give the trade buyer cash or
credit against outstanding indebtedness,
rather than exchange the product?
ATF Ruling 81-6, 1981-4 ATF Quarterly
Bulletin, pg. 23, held that defective
products which are unmarketable because
of product deterioration, leaking
containers, damaged labels, or mutilated
and missing strip stamps may be returned
for cash or credit against outstanding
indebtedness, as well as for exchange of
identical product under section 11.32.
Under Part 11, may an industry member buy
back a product from a trade buyer in
order to resell it in another market?
An industry member may, at any time,
buy back a product from a trade buyer,
assuming the transaction does not other-
wise violate the consignment sales
Inquiries. Inquiries concerning this circular
should refer to its number and be addressed to the
Assistant Director (Regulatory Enforcement), Bureau of
Alcohol, Tobacco and Firearms, 1200 Pennsylvania Avenue,
NW, Washington, DC 20226.